Young adult health plans limit coverage

State's low-cost insurance can be risky, report says

Ekaterina and Mark Friedman of Lowell once faced massive hospital bills related to their daughter's early birth. They were enrolled in a student insurance plan that had coverage limits.

By Alice Dembner, Globe Staff | May 29, 2007

The state's new low-cost health insurance coverage for young adults may have the same drawback as a long standing program for college students: It doesn't work for the seriously ill.

The plans, designed to entice people age 19 to 26 to buy insurance, are modeled on coverage that many Massachusetts students have had to purchase since 1989. Most of those student plans include annual limits on coverage for each illness, as well as caps on outpatient care and surgeons' fees that have left some students facing enormous bills, according to a report being released today by the Access Project, a Boston-based health advocacy and research group.

The new young adult plans contain some protections not included in the student plans, but most cap annual coverage at $50,000 or $100,000 to keep premiums low. Most of the student plans have caps of $25,000 or $50,000.

"These folks will often buy based on price alone," said Stephen D'Amato, an insurance consultant who is one author of the report. "But the main purpose of insurance is to protect people in those rare instances when you have huge costs. Allowing these caps is duplicating a mistake that was made nearly 20 years ago. It's going to destroy some lives."

The state should overhaul the student plans and eliminate the coverage limits in the new young adult plans, the report says.

State officials say that both plans are designed to balance affordability and coverage for what is typically a healthy population.

Young adults represent the largest segment of the uninsured in Massachusetts -- about 75,000 ages 19 to 24 alone. And the Legislature, worried that many would continue to resist buying insurance, decided to offer special plans for them as part of healthcare reform.

"We thought this was one place where we could be a little experimental, because they are a very low-risk population," said Representative Patricia Walrath, co-chair of the Legislature's Committee on Health Care Financing.

The law encourages insurers to use "cost-control techniques" to lower premiums for 19- to 26-year-olds, but also adds a safeguard -- allowing sale of the new plans only through the Commonwealth Health Insurance Connector, the agency overseeing the law. The connector authorized coverage limits for young people, but it banned similar caps for other age groups to ensure comprehensive coverage for serious illnesses.

Premiums for the young adult plans start as low as $119 a month without drug coverage for people in Greater Boston. That is $43 less per month than the lowest insurance with no annual limits. Like other adults in Massachusetts, young people must obtain insurance coverage by July 1 and are free to buy any insurance that meets state standards. The young adult plans are available only to people who are not offered insurance through their employer.

"Their needs are different from an older population, which is reflected in the benefits offered in these plans," said Richard Powers, a spokesman for the connector. "The cornerstone of our programs is choice. People also have the option to buy up."

Powers said the young adult plans are more comprehensive than student plans and limit out-of-pocket spending unless costs exceed the cap. National insurance claims data show that less than 1 percent of people age 19 to 64 run up insurance bills of more than $50,000 in one year, he said.

Ekaterina Friedman and her husband, Mark , of Lowell, had the misfortune to do so.

A few years ago, Ekaterina, now 28, enrolled at Middlesex Community College and bought one of the student plans. The premiums were attractive -- about $92 a month. Mark was working as a part-time instructor at several different colleges and wasn't eligible for work-based insurance, he said.

The Friedmans knew the student plan capped coverage at $25,000 per illness a year, but she was healthy and they didn't give it much thought. Then, she unexpectedly became pregnant and her water broke at 30 weeks, sending them rushing to Lowell General Hospital. Doctors there decided she needed more advanced care and transferred her to Brigham and Women's Hospital . Weeks later, when she and her healthy baby girl were able to go home, they faced more than $55,000 in unpaid hospital bills because of the $25,000 cap.

"We thought we were going to be financially ruined," said Mark.

With the help of the Access Project and a lawyer, they persuaded the insurer to pay another $25,000 toward the cost of the infant's care. The hospital agreed to write off some of the charges and the state's "free care pool" picked up the rest, according to the Access Project.

The family is still paying off the ambulance bills, however, which came to more than $2,000. The insurance policy covered only $150.

"The insurance was very attractive price-wise," said Mark. "But it wasn't a wise move, because if someone gets seriously sick, it's going to be way over $25,000" for care.

Nearly 90,000 students are covered under the student plans, which date from the state's first attempt at universal health coverage under Governor Michael S. Dukakis . Most provisions of that insurance initiative, except the student plan, were repealed.

Under rules imposed in 1989, all students enrolled three-quarter-time or more must buy the plans or prove they have equivalent coverage. College officials said they receive a steady stream of complaints about the limited coverage, but they also see some people enrolling just so they can become eligible to purchase the insurance.

Walrath said the Legislature could find no data on how many students had healthcare needs beyond what the policies covered. The Legislature decided that anyone holding a student plan would meet the state insurance requirement even though that coverage is far less comprehensive than new state minimum standards.

Sarah Iselin , newly appointed commissioner of the state division of healthcare finance and policy, which regulates the student plans, said the state's free care pool "has been available to cover the gaps." She said her office would monitor whether changes are needed in the plans as the state shrinks the free care pool as part of healthcare reform. The state has already decided to raise the minimum cap on the student plans to $50,000 in the fall.

Pressing for elimination of all the caps, Access Project officials noted that Blue Cross Blue Shield is offering a low-cost young adult plan without any dollar limits.

In addition, the report suggests that students with low incomes should be allowed into the state's subsidized insurance programs, which are very comprehensive.